A decision tree is a pictorial description of a well-defined decision problem. It is a graphical representation consisting of nodes (where decisions are made or chance events occur) and arcs (which connect nodes). Decision trees are useful because they provide a clear, documentable and discussible model of either how the decision was made or how it will be made.
The tree provides a framework for the calculation of the expected value of each available alternative. The alternative with the maximum expected value is the best choice path based on the information and mind-set of the decision-makers at the time the decision is made. This best choice path indicates the best overall alternative, including the best subsidiary decisions at future decision steps, when uncertainties have been resolved.
The decision tree should be arranged, for convenience, from left to right in the temporal order in which the events and decisions will occur. Therefore, the steps on the left occur earlier in time...
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